PUC Urged to Slash Returns of 4 Utilities : Regulation: Consumer groups scold the companies for seeking rate hikes in midst of hard economic times.

Two consumer groups on Monday excoriated the state’s four biggest utilities for seeking rate increases at a time of severe economic downturn, urging regulators to slash the utilities’ 1993 financial returns by $475 million.

Toward Utility Rate Normalization, a San Francisco group, and Utility Consumers’ Action Network, based in San Diego, proposed in a joint filing with the California Public Utilities Commission that regulators disapprove increases totaling $149 million sought by Pacific Gas & Electric, Southern California Edison, Southern California Gas and San Diego Gas & Electric.

They further asked that the PUC reduce utility rates “to more accurately reflect the economic realities of the state.”

“At a time when Californians are experiencing the worst economic conditions since the Great Depression, it is outrageous that utility companies should expect to add . . . to their already inflated profits,” Audrie Krause, TURN’s executive director, and Michael Shames, executive director of UCAN, said in a joint statement.

Krause added in an interview that the lowest interest rates in years are benefiting utilities by reducing their cost of borrowing funds to cover energy purchases or other expenses. These savings, she said, should be passed on to customers.

PG&E; attorney Kermit R. Kubitz said the rate increase requests reflect the San Francisco-based utility’s concerns about increased competition, deregulation and the potential for higher interest rates next year. He noted that PG&E; has “lost $300 million” in revenue in the last two years as customers have turned to alternative power sources.

Krause disagreed that the utilities are facing increased risk. The utilities have “monopolies with captive customers,” she said. “Their risks are relatively low.”

Krause said utilities always have the option of asking the PUC for rate increases during the year to recover certain unexpected costs.

Each year, the PUC takes testimony from utilities and other interested parties on what the rates of return, or profit margins, should be. The biggest portion is return on equity, or profit per common share of stock.

Last year, the four utilities asked for return on equity rates of 13.5% to 13.8%, but the PUC authorized 12.65% for all the utilities as part of a settlement among the various parties.

For 1993, the companies are requesting rates of about 13%, but TURN and UCAN want those reduced to about 10.5%. The Division of Ratepayer Advocates, an advisory group with the PUC that watches out for consumers, has recommended a rate of 11.55%.

Utility Company Rate Requests Two consumer groups, Toward Utility Rate Normalization and Utility Consumers’ Action Network, have criticized proposed rate increases by the state’s four largest utilities for 1993. They argue that the utilities’ financial returns should be cut next year.

Current Utilities’ rate requested TURN/UCAN Utility of return return rate recommendation Pacific Gas & Electric 12.65% 13.00% 10.50-10.75% Southern California Edison 12.65% 13.05% 10.25-10.50% San Diego Gas & Electric 12.65% 13.00% 10.50-10.75% Southern California Gas 12.65% 13.10% 10.75-11.00%

Return on equity is the company’s profit per share of common stock during a particular time period.

Source: Toward Utility Rate Normalization, Utility Consumers’ Action Network